Question

Which of the following is NOT a characteristic of a SEP? a. A SEP IRA is...

Which of the following is NOT a characteristic of a SEP?
a. A SEP IRA is 100% owned by the participant.
b. A SEP IRA is 100% vested immediately.
c. Plan loans are permitted.
d. SEP IRAs are funded by employer contributions only.
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Answer #1

c. Plan loans are permitted

Simplified Employee Plan (SEP) is a individual retirement arrangement which is established by employer or self-employed to contribute for eligible employee in their SEP labelled IRA account or traditional IRA account. Employer's contribution is tax deductible up to specified limit i.e 25% of employee's compensation.

A SEP IRA is 100% vested immediately which means amount contributed by employer to SEP IRA account is immediately owned (100%) by employee (participant).

All tradition rules of IRA applies to SEP IRA and Thus, Plan loans are not permitted against SEP IRA account.

Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.

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